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Oil: Global shares, oil drop after Trump tariff threat

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Equity markets, which have been largely expecting the two sides to reach a trade agreement soon, fell sharply as further talks to end their bruising trade war were thrown into doubt.

The trade war has resulted in billions of dollars of losses for both sides, while inflicting collateral damage on export-reliant economies and companies from Japan to Germany.

Chinese shares plunged more than 6 percent, while U.S. stock market futures fell 1.6 percent. Oil prices sank and the Chinese yuan weakened sharply.[.N]

The rout is set to continue in Europe. Financial spreadbetters expect Frankfurt’s DAX to open 1.7 percent lower at 12,207, and Paris’ CAC to open down 1.6 percent at 5,462. London is closed for a bank holiday.

Trump sharply escalated tensions between the world’s two largest economies with tweeted comments on Sunday that trade talks with China were proceeding “too slowly”, and that he would raise tariffs on $200 billion of Chinese goods to 25 percent on Friday from 10 percent.

He also said he would target a further $325 billion of Chinese goods with 25 percent tariffs “shortly”.

The tweets upended the previously calm market mood that had benefited from signs of improving economic growth in China and the United States, and from comments from Trump and other senior U.S. officials that trade talks were going well.

The Wall Street Journal reported on Monday that China was considering cancelling trade talks scheduled for this week following Trump’s threats. Conflicting later reports on Chinese Vice Premier Liu He’s travel plans added to market confusion.

“I think this has got the potential to be a real game-changer,” said Nick Twidale, Sydney-based analyst at Rakuten Securities Australia.

“There is still a question of whether this is one of the famous Trump negotiation tactics, or are we really going to see some drastic increase in tariffs. If it’s the latter, we’ll see massive downside pressure across all markets,” he said.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 1.9 percent in afternoon trade as markets across the region fell deep into the red.

Chinese blue-chips were down more than 6 percent, having closed higher before a three-day national holiday amid expectations that pressures on China’s economy were easing.

The drop in Chinese shares came despite a move on Monday by China’s central bank to cut reserve requirements for small banks to help boost lending to small and private firms.

Australian shares were off 0.8 percent.

Japanese financial markets remain closed until Tuesday for a national holiday, but Nikkei 225 futures were down 1.9 percent at 22,075, off the day’s lows.

E-Mini futures for the S&P 500 slid 1.6 percent, erasing memories of gains on Friday after the U.S. payroll data had helped to lift Wall Street, and signaling a rough open for U.S. stocks on Monday.

“The risk for (Trump) is that the Chinese don’t play ball and don’t go ahead with the negotiation,” said Shane Oliver, head of investment strategy at AMP in Sydney.

“It’s not in his interest for shares to go down as it would hit U.S. business confidence and investment, and that would shoot up unemployment. And that would be a risk for his re-election, too,” he said.

But economists at Citi painted a brighter picture of the outlook for Chinese markets following the recent stabilization of the Chinese economy.

“Should trade tensions resume, we expect a speedy reaction by China’s policy-makers, with policy implementation made more effective. Given the scope for fiscal and monetary stimulus is large in the near term, we believe the negative impact from additional tariffs will likely be managed better this time,” they said in a note.

 

MORE EASING ON THE WAY?

The flight from riskier assets boosted interest in safe havens, pushing U.S. Treasury futures up 16 ticks. Data from CME Group showed the market now sees a nearly 56 percent chance of a Federal Reserve rate cut by the end of the year.

Chinese 10-year treasury futures also jumped, with the most-traded contract, for June delivery rising as much as 0.5 percent. They were last up 0.27 percent at 96.855.

“The intensified trade and geopolitical risks are likely to prompt the regional central banks for more stimulatory policies,” analysts at ING said in a note. “We expect the majority of Asian central banks meeting this week to cut their policy rates.”

As investors flocked to the safe-haven yen, the dollar dropped 0.3 percent against the Japanese currency to 110.78.

But China’s yuan plunged, with the offshore unit weakening to 6.8215 per dollar, its weakest level since January 10, before paring some losses.

The onshore yuan weakened nearly 1 percent to 6.7980 per dollar before bouncing back to 6.7805.

In contrast to the sharp moves in Asian currencies, the euro was down less than 0.1 percent on the day at $1.1193, and the dollar index, which tracks the greenback against a basket of six major rivals, was up 0.06 percent at 97.579.

In commodity markets, Trump’s tweets sparked a plunge in oil prices. U.S. crude at one point dropped as much as 3.1 percent to a more-than-five-week low, before bouncing to $60.51 per barrel – still off 2.3 percent on the day.

Brent crude was 2.2 percent lower at $69.28 per barrel.

The tweets have compounded pressure on prices amid signs of a rise in U.S. output, which has surged by more than 2 million barrels per day since early 2018.

Spot gold jumped 0.25 percent to trade at $1,282.20 per ounce.

 

 


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24 Hours Across Africa

Nissan to recall over 40,000 cars due to malfunction of brake fluid leak

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Japanese automaker gaint Nissan says,  it’s recalling nearly 400,000 vehicles in the U.S. because of a braking system defect that could cause them to catch fire.

Users and Owners are advised to park affected vehicles outside and away from structures if the anti-lock brake system warning light comes on for more than 10 seconds.

The Japanese automaker says a pump seal may become worn down and cause brake fluid to leak. “If the warning is ignored … the brake fluid leak may potentially create an electrical short in the actuator circuit, which in rare instances, may lead to a fire,” the company says in documents sent to the National Highway Traffic Safety Administration.

The recall affects four different models in the U.S.: the Nissan Murano SUV, model years 2015 to 2018; Maxima sedans, model years 2016 to 2018; and the Infiniti QX60 and Nissan Pathfinder SUVs, model years 2017 to 2019.

Nissan says in a statement emailed to NPR that it is working on a fix and that owners of affected vehicles will be notified beginning in early December 2019. “Once the remedy is available, owners will receive a final notification letter asking them to bring their vehicle to an authorized Nissan dealer or INFINITI retailer to have the remedy work completed at no cost for parts or labor,” the company says.

This isn’t the first time Nissan has had problems with brake fluid leaks. Last year, for example, Nissan recalled more than 215,000 vehicles. The automaker says vehicles in the 2018 recall that haven’t been repaired are included in the current recall.

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24 Hours Across Africa

World food prices hike for first time in five months: U.N. FAO

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World food prices rose for the first time in five months in October, boosted by jumps in quotations for sugar and cereals, the United Nations food agency said on Thursday.

The Food and Agriculture Organization (FAO) food price index, which measures monthly changes for a basket of cereals, oilseeds, dairy products, meat and sugar, averaged 172.7 points in October, up 1.7% on the previous month and 6.0% year-on-year.

FAO also predicted that cereal production would be 2.704 billion tonnes in 2019, slightly lower than its last forecast.

The FAO sugar price index jumped 5.8% from September levels, largely because of expectations of lower supplies in the year ahead following forecasts of large reductions in sugar output in India and Thailand.

The cereal price index rose 4.2%, with wheat and maize export prices climbing on the back of reduced crop prospects in several major producing countries and “robust trade activity”. By contrast, rice prices fell, hit by subdued demand and expectations of an abundant basmati harvest.

The vegetable oil price index increased 0.5% to reach its highest level in more than a year, while the meat price index rose 0.9%, driven by higher import demand especially from China.

By contrast, the dairy price index dropped 0.7% in October, as lower quotations for cheese offset increases in those for skimmed and whole milk powders, FAO said.

FAO lowered its forecast for global cereal production in 2019 by some 2 million tonnes, pegging world cereal output at 2.704 billion tonnes, but still up 1.8% from 2018 levels.

The U.N. agency said worldwide coarse grain production in 2019 was seen at 1.425 billion tonnes, down 1.3 million on the previous forecast.

Wheat output was seen at 765 million tonnes, down nearly 1 million tonnes on the last outlook, but still on course to set a new record and up 4.5% on 2018 levels.

The forecast for global rice production was put at 513.4 million tonnes, little changed on the previous forecast and slightly below 2018 levels.

Source: Reuters

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